You just have to check out www.zillow.com. This is a new website that gives you a free AVM on any piece of residential property in the USA.
AVM is short for an Automated Valuation Model. AVM's have been touted as the next best thing to sliced bread. They give you the value of a piece of real estate in an instant, without the time and expense of an appraisal. Except they are not an appraisal.
Zillow calls their product a Zestimate! And they are free!!. This is the brainchild of Richard Barton, the man that brought you Expedia.com. I don't know what the grand plans for Zillow are but they are getting real estate brokers licenses across the USA. It seems like they are going after the full service real estate company's.
The website just went live last week and already I had several calls from mortgage brokers telling me that Zillow.com says a house is worth "this and that" and they need this value to make their deals work. Yea these guys say so and it must be true! Except its not an appraisal.
AVM's take into account information that is available in public record. They track recent sales in a neighborhood and based on some secret formula, they are able to come up with a value. Banks use AVM's as support for low loan to value transactions. Such as you own a $550,000.00 house with a $175,000.00 existing mortgage and now you want to borrow 10 grand. So the value is off by $50,000.00, who cares?
The difference in having an appraisal is that a licensed professional will see the property. Individual homes vary widely in modernization and condition. The appraiser will select comparable's that are truly representative of the home being appraised. In addition the appraiser will verify that the comparable sale was an "Arms Length Transaction" and the sale was from the open market. Just a few things that a computer cant do.
So go to Zillow.com and get a Zestimate, Hey the price is right! Just don't call it an appraisal.